periodic interest rate cap

Definition

Specifies the maximum change in the interest rate of the loan and the minimum period at which the change occurs. The interest rate change includes an increase as well as a decrease in the rate. As most loans have a floating rate of interest, a sudden hike in interest rates will only affect that of the loan by an amount equal to the cap and the rate will also change only after the specified time period has passed.
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periodic interest rate periodic inventory method